Yellen says no to currency provisions in trade deals

Federal Reserve Chairwoman Janet Yellen told lawmakers on Tuesday that she would have a significant problem with adding currency manipulation provisions into global trade agreements.  

Yellen said monetary policy decisions — such as the massive stimulus programs at the Fed since the 2008 financial crisis — can affect currency exchange rates but don’t amount to currency manipulation. 

{mosads}”I think currency manipulation that is undertaken in order to alter the competitive landscape and give one country an advantage in international trade is inappropriate and needs to be addressed,” she told the Senate Banking Committee where she presented the semiannual monetary policy report.

Since monetary policy can affect currency values, Yellen said that she “would really be concerned about a regime that would introduce sanctions for currency manipulation into trade agreements when it could be the case that it would hamper or even hobble monetary policy.”

“I would really worry very greatly about that approach,” she said.

In response to questions from Sen. Bob Corker (R-Tenn.), she said the Fed’s massive economic stimulus was designed for valid domestic objectives and “and that certainly is not currency manipulation.”

A bipartisan group of House and Senate lawmakers recently introduced currency manipulation legislation that would punish countries for lowering their currency values to gain a global trade advantage.

Democrats and Republicans on both sides of the Capitol are continuing to press for currency provisions in the Trans-Pacific Partnership (TPP), as well as other trade deals in the works. 

President Obama has said that adding the language into the trade agreements would complicate the deals and possibly sink years of talks.

Meanwhile, House Ways and Means Committee ranking member Sandy Levin (D-Mich.) said that Yellen’s concerns aren’t warranted because the International Monetary Fund’s guidelines clearly spell out that U.S. monetary policy, including quantitative easing, is not currency manipulation.

“Under the IMF guidelines, which I have proposed using as a basis in TPP, currency manipulation is about government interventions in the foreign exchange markets, not about other policies that may have a secondary impact on foreign exchange rates,” he said.

“Currency manipulation has negatively affected the impact of trade and has likely cost the U.S. millions of jobs and it must be addressed as part of our TPP negotiations.”